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Question

Q3. Consider the following statements about Trade War:

1. A trade war happens when one country puts up a trade barrier, like strict tariffs.

2. It is done to protect its economy from foreign competition.

Which of the statements are correct?


A

a) 1 only

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B

b) 2 only

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C

c) Both 1 and 2

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D

d) None of the above

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Solution

The correct option is C

c) Both 1 and 2


What is Trade War?

  • A trade war happens when one country puts up a trade barrier, like strict tariffs (which are border taxes on imports), to protect its economy from foreign competition — and another country decides to strike back with its own trade barriers.
  • Canada and the European Union are both threatening to retaliate against the US after President Donald Trump announced that he planned to impose big tariffs on imported steel and aluminum by using an obscure trade law.
  • Those tariffs will hurt the ability of Canada, Germany, and other countries to sell steel and aluminum to the US.
  • The tariffs will end up inflicting substantial damage on them—particularly Canada, which accounts for almost 17% of the US’ steel imports.

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